As a former employment law attorney and now as an organization consultant and executive coach, I've encountered many situations where, instead of a problem employee being let go, he or she is demoted. With rare exceptions, I believe this approach is a mistake.
The demotion decision often arises from what I call the "insidious instinct to avoid," as well as a misguided belief that a demotion is more humane than a termination. I've encountered the following result on a great many occasions: A disgruntled, disengaged employee continues to cause damage to the organization. The person may accept the demotion out of perceived economic necessity, but don't expect gratitude from them.
"Love the people who work for you," said Fortune 50 CEO coach Marshall Goldsmith, the bestselling author of The Earned Life (Currency, 2022). "If not, let them go. Don't kick them and expect them to be grateful."
In my view, if you conclude that an employee is not right for the job, the presumption should be separation from employment. Instead of keeping the worker on the payroll, you can offer severance benefits, COBRA premium subsidies and outplacement assistance.
"I find that demotion rarely solves the problem," said Colleen McManus, SHRM-SCP, a senior HR executive with the state of Arizona. Senior managers in her organization once wanted to demote a second-level manager for a serious incident of sexual harassment with a subordinate. Management recommended that the employee be returned to a line supervisor position, which was one pay level lower than the second-level position—there would be a corresponding pay reduction.
"Management felt this was sufficient 'punishment' to correct the behavior," McManus said. "My recommendation from the HR perspective was either demotion to a non-supervisory position or dismissal of the individual. I was less concerned with the employee's sanction than I was for the welfare of the employees this person would continue to supervise in a line supervisor position."
Senior management prevailed, and the person was indeed demoted to a line supervisor position. Five months later, HR received a sexual harassment complaint from a subordinate in the employee's unit. After this second incident, the organization dismissed the employee. Senior leaders expressed remorse that other employees had been subjected to harassing behavior and acknowledged that the harm would have been avoided had the employee been fired after the first incident.
When Demotions Can Be Successful
The key to making demotions work for both parties is ensuring 1) the employee isn't simply agreeing to the new position out of perceived economic necessity but genuinely wants the job and 2) the employer genuinely believes the employee will be a good fit for the role.
An example might be a successful salesperson who is promoted to sales manager, but isn't successful in that position. If the person genuinely wanted to return to their former role, then the "demotion" (it's really a reassignment) could work. I'd still want to make sure that the "new" salesperson is truly committed to the position and will support a positive work culture.
"I have seen demotions in this situation succeed, when the employee learns the hard way that leadership requires a different skill set than being a great individual contributor," McManus said. "If the person recognizes he or she is not cut out or not yet prepared for leadership, in some cases, the person can willingly return to what he or she already knows and can succeed at."
One way to test this approach is to offer the person an alternative: the choice of a severance package or a reassignment. If the person elects the latter, be sure to proactively follow up and follow through to make sure the employee is meeting expectations and behaving as a team player. I'd let the person know you'll be periodically checking in.
If problems arise once the worker is in the reassigned position, I strongly advise against repeating the process ("Ugh, that didn't work. Let's try this position instead."). This time, the person really needs to go.
"Demotion may be one of the options in the employee relations toolkit, but because it rarely addresses the issue or behavioral problem at hand, it should be used very sparingly, and only when we are sure that it's in the best interest of the organization," McManus said.
Beware the tendency or inclination to demote rather than fire. If the employee has failed in their current position, it's most likely a good sign that they need to find employment elsewhere. However, if you decide that your circumstances warrant an exception to this general rule, proceed with care and caution.
Jathan Janove, J.D., is the author of Hard-Won Wisdom: True Stories from the Management Trenches (HarperCollins/Amacom, 2017). He is immediate past president of the Oregon Organization Development Network and was named in Inc. magazine as one of the Top 100 Leadership Speakers for 2018. If you have questions or suggestions for topics for future columns, write to email@example.com.